Release Date: May 02, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SB Financial Group Inc (NASDAQ:SBFG) reported a 27% increase in diluted earnings per share compared to the prior year quarter.
• The company completed the acquisition of Marblehead Bank Corp, which contributed to a 10% growth in deposits.
• Net interest income increased by approximately 23% from the first quarter of 2024.
• Loan growth was strong, with a 9.8% increase from the prior year, marking the fourth consecutive quarter of sequential loan growth.
• The title business had a very strong quarter, exceeding prior year revenue by nearly 50%.

Negative Points

• Mortgage origination for the quarter was down from the prior year and linked quarters.
• Operating expenses increased by approximately 3.5% from the linked quarter.
• Non-performing assets increased to 6.1 million, representing 41 basis points of total assets.
• The efficiency ratio for the quarter was 76%, indicating room for improvement in operational efficiency.
• The percentage of non-interest income to total revenue was below historical averages due to expanded margin revenue.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with SBFG.

Q: Can you provide insights on the loan growth outlook and any concerns regarding tariffs affecting client decisions? A: Tony Cosentino, CFO, expressed confidence in the loan growth pipeline, noting that most loans in the 90-day pipeline have already closed or are in the process of funding. Mark Klein, CEO, added that the Columbus market remains strong, and while there is economic uncertainty, it hasn't led to a pullback in loan growth. Steve Wall, Chief Lending Officer, mentioned that borrowers remain optimistic despite potential tariff concerns.

Q: What is the outlook for mortgage origination and the current pipeline? A: Mark Klein, CEO, stated that the current mortgage pipeline is in the low $50 million range, with expectations to reach $380 million for the year. The company has expanded its team to 28 producers, including new additions in the Cincinnati market, and is optimistic about meeting its mortgage origination targets.

Q: How are deposit trends expected to evolve, and what impact will they have on liquidity and loan funding? A: Tony Cosentino, CFO, noted that while some seasonal deposits may decrease, core deposit growth is expected to remain strong at 4-5%. The company has ample liquidity to fund loan growth, with expectations to use existing liquidity and reprice loans to higher yields.

Q: What is the expectation for net interest margin (NIM) and the impact of potential rate cuts? A: Tony Cosentino, CFO, anticipates the NIM to improve by 4-5 basis points per quarter, potentially reaching 3.55% to 3.60% by Q4 2025. The company expects two rate cuts, which should not significantly impact the anticipated loan repricing and funding cost reductions.

Q: How are capital levels and priorities being managed post-acquisition, and what are the plans for buybacks or dividends? A: Tony Cosentino, CFO, mentioned that capital levels remain strong, and the company is comfortable with its current CET1 level. The buyback program remains viable, and the company plans to maintain its dividend policy, with potential increases as earnings and capital levels improve.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.